Kirkland Lake Gold Ltd. (“Kirkland Lake Gold” or
the “
Company”) (TSX:KL) (NYSE:KL) (ASX:KLA) today
announced the Company’s full-year guidance for 2020, which includes
continued strong operating and financial results, with consolidated
production targeted at 950,000 – 1,000,000 ounces and operating
cash costs per ounce sold and all-in sustaining costs per ounce
sold expected to average $300 – $330 and $570 – $630, respectively.
The Company will also continue to invest aggressively in
growth, including commencing work on development ramps aimed at
establishing two new mining operations, Robbin’s Hill at
Fosterville and previously identified high-grade zones near surface
along the Amalgamated Break at Macassa. The Company will also
continue advanced exploration work in the Northern Territory, a
potential third new source of future production. The Company
expects to produce 100,000 – 120,000 ounces in the Northern
Territory in 2020, which is not included in the Company’s 2020
guidance pending the resumption of commercial operations. All
dollar amounts are expressed in U.S. dollars unless otherwise
noted.
The Company also announced today three-year
production guidance for the Macassa and Fosterville mines.
Production at Macassa is targeted to increase to over 320,000
ounces by 2022 reflecting initial production from the #4 Shaft and
potential production from the planned Macassa surface ramp.
Production at Macassa is expected to grow to well over 400,000
ounces beginning in 2023. Production at Fosterville is expected to
maintain the strong growth achieved in 2019 over the next three
years as mining continues to advance in the high-grade Swan Zone,
with the potential for production to commence from Robbin’s Hill in
2023.
Highlights of 2020 guidance
include:
- Production of 950,000 – 1,000,000 ounces,
unchanged from current full-year 2019 guidance (additional 100,000
– 120,000 ounces of production expected in 2020 from Northern
Territory, with proceeds to offset planned capital expenditures
pending decision to resume commercial operations)
- Operating cash costs per ounce sold1 of $300 –
$330 compared to nine-month 2019, to September 30, 2019, (“YTD
2019”) average of $296
- All-in sustaining costs (“AISC”) per ounce
sold1 of $570 – $630 versus YTD 2019 average of $584
- Exploration expenditures2 targeted at $120 –
$140 million, including capitalized exploration expenditures,
unchanged from full-year 2019 guidance
- Sustaining capital expenditures1 of $165 –
$175 million compared to full-year 2019 guidance of $170 – $190
million
- Growth capital expenditures1 of $70 – $80
million, significantly lower than current full-year 2019 guidance
of $175 – $185, reflecting solid progress advancing major projects
in 2019 (2020 guidance includes $50 – $55 million at Macassa,
including approximately $45 million related to #4 shaft project,
and $20 – $25 million at Fosterville).
- See the “Non-IFRS Measures” section starting on page 30 of the
Company’s MD&A for the three and nine months ended September
30, 2019 filed on the Company’s profile on SEDAR at
www.sedar.com.
- Exploration expenditures include capital expenditures related
to infill drilling for Mineral Resource conversion, capital
expenditures for extension drilling outside of existing Mineral
Resources and expensed exploration.
Highlights of three-year production
guidance include:
- Macassa: Production to total 240,000 – 250,000
ounces in 2020 and 2021, increasing to 320,000 – 340,000 ounces in
2022 with initial production from the #4 Shaft and potential
production for the planned Macassa surface ramp
- Fosterville: Production targeted at 590,000 –
610,000 ounces in 2020 and 550,000 – 600,000 ounces for the
following two years, with the potential for additional production
beginning in 2023 from underground access at Robbin’s Hill
Tony Makuch, President and Chief Executive
Officer, commented: “Kirkland Lake Gold is poised to achieve strong
operating and financial results in 2020, with both Fosterville and
Macassa well positioned to repeat their solid performances in
2019 during the coming year. With target consolidated production of
950,000 – 1,000,000 ounces and low unit operating costs, we are on
track to continue to generate industry-leading earnings and
significant free cash flow in 2020, which will contribute to
further growth in our balance sheet strength. Going forward, our
top priority will remain investing in Fosterville and Macassa given
the substantial opportunities that exist at both operations for
continued exploration success and additional growth. We will also
look to increase the amount of capital we return to Kirkland Lake
Gold shareholders through our dividend program and normal course
issuer bid and continue to look for investment opportunities
capable of generating attractive returns.
“Looking at growth, we will continue to invest
in organic growth in 2020 with the aim of advancing three new
potential mining operations, Robbin’s Hill at Fosterville,
previously identified high-grade zones near surface along the
Amalgamated Break at Macassa, and our Northern Territory assets in
Australia. The advanced exploration work in the Northern Territory
is continuing into 2020 and has the potential to add to our
production profile, with 100,000 to 120,000 ounces expected to be
produced at the Union Reefs Mill during the coming year, which we
are not including in our guidance until we reach a decision to
resume commercial operations. This decision could come as early as
February 2020 following release of our December 31, 2019 Mineral
Reserve and Mineral Resource estimates. At Fosterville, we are
commencing work on a twin 4.8 km underground ramp to connect
Robbin’s Hill to the existing mine infrastructure, while at Macassa
we will begin driving a ramp to access and explore near-surface,
high-grade zones along the Amalgamated Break. Robbin’s Hill and the
Amalgamated Break are key exploration targets for our company, and
we believe are two of the most compelling exploration stories in
our industry today. Gaining access to these areas underground will
allow us to accelerate efforts to fully evaluate their potential
and will provide valuable infrastructure to support moving them
into production.
“Finally, while not included in our guidance,
our agreement to acquire Detour Gold Corporation has the potential
to significantly change our outlook for 2020 and beyond in a very
positive way. For Kirkland Lake Gold, the transaction adds a third
high-quality asset with substantial growth potential. For Detour
Gold, the deal provides access to a highly profitable, multi-asset
portfolio as well as the industry’s strongest balance sheet and a
dividend program that we expect will grow and return significantly
higher levels of capital to shareholders going forward. The
agreement is a good deal for the shareholders of both companies and
we are looking forward to it closing at the end of January 2020,
with our guidance to be revised following closing of the
transaction.”
Holt Complex
On October 9, 2019, the Company announced that
the future plans for the Holt Complex operations were under review.
This review is expected to extend into 2020. As a result,
production and operating cash cost per ounce sold for the Holt
Complex are included in the Company’s consolidated guidance for
2020. However, the Company is not providing three-year production
guidance at this time.
Northern Territory
The Company commenced processing Lantern Deposit
mineralization at the Union Reefs Mill in October 2019 as part of
an advanced exploration program. Approximately 10,000 ounces are
expected to have been produced and sold by the end of 2019, with
the proceeds from gold sales being accounted for as a reduction in
capital expenditures. The advanced exploration program is expected
to continue into 2020, with 100,000 –120,000 ounces of production
planned at the Union Reefs Mill. The proceeds from gold sales will
continue to reduce capital expenditures pending a decision to
resume commercial operations. Until commercial operations
resume, production, costs and expenditures for the Northern
Territory are excluded from the Company’s 2020 guidance and
three-year production guidance. In 2020, the proceeds from gold
sales are expected to largely offset capital and exploration
expenditures in the Northern Territory.
2020 Guidance
($
millions unless otherwise stated) |
Macassa |
Holt Complex Complex(2) |
Fosterville |
Consolidated |
Gold production (kozs)(1) |
240 – 250 |
120 – 140 |
590 – 610 |
950 – 1,000 |
Operating cash costs/ounce sold ($/oz)(2) |
$470 - $490 |
$790 - $810 |
$130 - $150 |
$300 - $330 |
AISC/ounce sold ($/oz)(2) |
|
|
|
$570 - $630 |
Operating cash costs ($M)(2) |
|
|
|
$310 - $320 |
Royalty costs ($M) |
|
|
|
$58 - $62 |
Sustaining capital ($M)(2) |
|
|
|
$165 - $175 |
Growth capital ($M)(2) |
|
|
|
$70 - $80 |
Exploration ($M)(3) |
|
|
|
$120 - $140 |
Corporate G&A ($M)(4) |
|
|
|
$40 - $45 |
- Production and unit-cost guidance for 2020 does not include
results for the Northern Territory.
- See “Non-IFRS Measures” set out starting on page 30 of the
MD&A for the three and nine months ended September 30, 2019 for
further details. The most comparable IFRS Measure for operating
cash costs, operating cash costs per ounce sold and AISC per ounce
sold is production costs, as presented in the Consolidated
Statements of Operations and Comprehensive Income, and total
additions and construction in progress for sustaining and project
capital. Operating cash costs, operating cash cost per ounce sold
and AISC per ounce sold reflect an average US$ to C$ exchange rate
of 1.30 and a US$ to A$ exchange rate of 1.43.
- Exploration expenditures include capital expenditures related
to infill drilling for Mineral Resource conversion, capital
expenditures for extension drilling outside of existing Mineral
Resources and expensed exploration.
- Includes general and administrative costs. Excludes non-cash
share-based payment expense.
- The Company’s full operating and financial results for
full-year 2019 will be released in late February 2020. As such,
comparisons in this press release involving financial measures
included in the Company’s 2020 guidance are made to existing
full-year 2019 guidance, as well as the Company’s nine-month 2019
results.
Review of 2020 Guidance
- Consolidated gold production in 2020 is
targeted at approximately 950,000 – 1,000,000 ounces, unchanged
from full-year 2019 guidance. Production at Fosterville in 2020 is
estimated at 590,000 – 610,000 ounces, similar to 2019 guidance of
570,000 – 610,000 ounces. YTD 2019 production at Fosterville (to
the end of September 2019) was 427,472 ounces, an 84% increase from
the same period in 2018, with the ramp up of production from the
high-grade Swan Zone largely accounting for the strong
year-over-year growth. Production will remain focused on the Swan
Zone in 2020, with the significant step up in production in 2019
being sustained throughout the coming year. Production guidance at
Macassa in 2020 of 240,000 – 250,000 ounces remains unchanged from
current full-year 2019 guidance. A substantial increase in
production at Macassa will commence in 2022 with initial production
from the new #4 shaft and potential production from the Macassa
surface ramp, which is being driven to access high-grade zones near
surface along the Amalgamated Break. Production at Holt Complex in
2020 is targeted at 120,000 – 140,000 ounces, similar to current
full-year 2019 guidance. The Company is currently reviewing the
future plans of the Holt Complex operations.
- Operating cash costs per ounce sold are
expected to average $300 – $330 compared to the average for YTD
2019 of $296. The Company’s low unit operating cash costs will
again be driven by Fosterville, where operating cash costs per
ounce sold are targeted at $130 – $150, unchanged from current
full-year 2019 guidance and compared to the YTD 2019 average of
$126. Operating cash costs per ounce sold at Macassa in 2020 are
targeted at $470 – $490, which compares to current full-year 2019
guidance of $400 – $420 and the YTD 2019 average of $397. The
increase in operating cash costs per ounce sold guidance at Macassa
in 2020 compared to the YTD 2019 average largely reflects lower
planned grades in 2020, with the YTD 2019 grade of 24.8 grams per
tonne exceeding target levels due mainly to grade outperformance
early in the year in stopes around the 5700 Level of the South Mine
Complex (“SMC”). Operating cash costs per ounce sold guidance for
2020 at the Holt Complex is $790 – $810, which compares to current
full-year 2019 guidance of $920 – $940 and average operating cash
costs per ounce sold of $948 for YTD 2019.
- AISC per ounce sold are targeted to average
$580 – $630 in 2020 compared to the YTD 2019 average of $584. The
increase compared to the anticipated full-year 2019 AISC per ounce
sold level mainly relates to higher operating cash costs, an
increase in royalty expense resulting from a new royalty applicable
to the Fosterville Mine (see Royalty costs below) and higher
corporate G&A expense.
- Operating cash costs for 2020 are estimated at
$310 – $320 million, which compares to the current guidance for
full-year 2019 of $290 – $300 million and YTD 2019 operating cash
costs of $207.3 million.
- Royalty costs in 2020 are estimated at $58 –
$62 million compared to current guidance for 2019 of $30 – $35
million and total royalty costs of $25.4 million for YTD 2019. Of
expected royalty payments in 2020, approximately $40 million
relates to Fosterville, of which approximately $24 million results
from a new 2.75% royalty being introduced by the Victorian
Government effective January 1, 2020.
- Sustaining capital expenditures in 2020 are
targeted at $165 – $175 million, similar to the current full-year
2019 guidance of $170 – 190 million (YTD 2019 sustaining capital
expenditures of $140.0 million).
- Growth capital expenditures are estimated at
$70 – $80 million in 2020, a reduction from current full-year 2019
guidance of $175 – $185 million and YTD 2019 growth capital
expenditures of $137.1 million. Of planned project capital
expenditures in 2020, Macassa is expected to account for $50 – $55
million, with approximately $45 million relating to the #4 shaft
project. Project capital expenditures at Fosterville in 2020 are
estimated at $20 – $25 million, which compares to target
growth capital expenditures of $55 million in 2019. The reduction
reflects the completion, or near completion, of a number of major
projects in 2019, including the paste fill plant and water
treatment plant, with a new ventilation system well advanced as of
the end of 2019 and on track for completion early in 2020. In
addition to completing the ventilation project, major components of
the 2020 capital program at Fosterville include expenditures for
the completion of a transformer station upgrade and new gold
room/refinery, construction of a new surface refrigeration plant,
the installation of a second paste fill delivery hole and the
extension of paste fill to Harrier.
- Exploration expenditures in 2020 are estimated
at $120 – $140 million, of which approximately 80% to 85% are
expected to be capitalized exploration expenditures. Exploration
expenditures at Fosterville are targeted at $70 – $80 million,
including $15 – $20 million related to the underground development
for a twin 4.8 km underground exploration drive to connect Robbin’s
Hill to existing mine infrastructure at Fosterville. The decline is
a three-year project that will support underground exploration of
Robbin’s Hill and other targets and provide valuable infrastructure
for future mine operations. In addition, a total of 230,000 metres
of underground and surface drilling are planned at Fosterville in
2020, with the primary targets continuing to be the Lower Phoenix
system, Cygnet, Harrier, Robbin’s Hill and a number of regional
targets. At Macassa, total capital and expensed exploration
expenditures are targeted at $40 – $50 million. Significant
exploration development is planned at Macassa in 2020, including
work on a new exploration decline to access and explore previously
identified high-grade zones near surface along the Amalgamated
Break. In addition, development to extend exploration drifts is
planned on the 5150, 5705 and 5807 levels mainly in support of
drilling to infill and extend the SMC and to evaluate targets at
depth along the Amalgamated Break. A total of 270,000 metres of
underground and surface drilling is planned at Macassa in 2020,
with the primary targets being the SMC, Amalgamated Break and
select targets along the Main and ’04 breaks.
- Corporate G&A expense in 2020 is targeted
at $40 – $45 million, higher than the current guidance for
full-year 2019 of $30 – $35 million reflecting the continued growth
of the Company.
Three-Year Production
Guidance1
|
Macassa |
Fosterville |
2020 (kozs) |
240 – 250 |
590 – 610 |
2021 (kozs) |
240 – 250 |
550 – 600 |
2022 (kozs) |
320 – 340 |
550 – 600 |
(1)
Three-year production guidance does not include any production from
the Holt Complex or Northern Territory.
Macassa: Production at Macassa
in 2020 is expected to be similar to 2019 levels, with 2020
guidance of 240,000 – 250,000 ounces. Production in 2021 is
should remain similar to 2020, with significant growth in
production expected to commence in 2022 reflecting initial
production from the #4 Shaft and potential production from the
planned Macassa surface ramp. Production in 2022 is targeted at
320,000 – 340,000 ounces, with production then expected to grow to
over 400,000 ounces in 2023.
Fosterville: After achieving
substantial growth in 2019 with the ramp up of production from the
high-grade Swan Zone, production at Fosterville is expected to
sustain levels at or close to 600,000 ounces per year over the next
three years. Production guidance for Fosterville includes 590,000 –
610,000 ounces in 2020 and 550,000 – 600,000 ounces in both 2021
and 2022, with the potential existing for a new source of
production at Robbin’s Hill commencing in 2023.
Qualified Persons
Eric Kallio, P.Geo., Senior Vice President,
Exploration, is a “Qualified Person” as defined in NI 43-101 and
has reviewed and approved the technical and scientific data
included in this press release. In addition, Ian Holland, Vice
President, Australian Operation, a “Qualified Person” under NI
43-101, has reviewed and approved the technical and scientific data
in this press release relating to the Australian operations.
Natasha Vaz, P.Eng., Vice President, Technical Services, a
“Qualified Person” under NI 43-101 has reviewed and approved the
technical and scientific data in this press release relating to the
Canadian operations.
About Kirkland Lake Gold Ltd.
Kirkland Lake Gold Ltd. is a growing gold
producer operating in Canada and Australia that produced 723,701
ounces in 2018 and is on track to achieve significant production
growth in 2019, to 950,000 – 1,000,000 ounces. The production
profile of the Company is anchored by two high-grade, low-cost
operations, including the Macassa Mine located in Northern Ontario
and the Fosterville Mine located in the state of Victoria,
Australia. Kirkland Lake Gold's solid base of quality assets is
complemented by district scale exploration potential, supported by
a strong financial position with extensive management
expertise.
For further information on Kirkland Lake Gold
and to receive news releases by email, visit the website
www.klgold.com.
Non-IFRS Measures
The Company has included certain non-IFRS
measures in this press release, as discussed below. The Company
believes that these measures, in addition to conventional measures
prepared in accordance with IFRS, provide investors an improved
ability to evaluate the underlying performance of the Company. The
non-IFRS measures are intended to provide additional information
and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with IFRS.
These measures do not have any standardized meaning prescribed
under IFRS, and therefore may not be comparable to other issuers.
Refer to the MD&A for the three and nine months ended September
30, 2019, dated November 6, 2019, for the most recent non-IFRS
reconciliations.
Cautionary Note Regarding Forward-Looking
Information
This press release contains “forward looking
statements” and "forward-looking information" within the meaning of
applicable securities laws, including statements regarding the
plans, intentions, beliefs and current expectations of Kirkland
Lake Gold with respect to future business activities and operating
performance. Forward-looking information is often identified by the
words "may", "would", "could", "should", "will", "intend", "plan",
"anticipate", "believe", "estimate", "expect" or similar
expressions and include information regarding: (i) the amount of
future production over any period; (ii) assumptions relating to
revenues, operating cash flow and other revenue metrics set out in
the Company's disclosure materials; (iii) future exploration plans;
(iv) changes in Mineral Resources and conversion of Mineral
Resources to proven and probable reserves; and (v) other
information that is based on forecasts of future operational or
financial results and estimates of management.
Investors are cautioned that forward-looking
information is not based on historical facts but instead reflect
Kirkland Lake Gold's management's expectations, estimates or
projections concerning future results or events based on the
opinions, assumptions and estimates of management considered
reasonable at the date the statements are made. Although Kirkland
Lake Gold believes that the expectations reflected in such
forward-looking information are reasonable, such information
involves risks and uncertainties, and undue reliance should not be
placed on such information, as unknown or unpredictable factors
could have material adverse effects on future results, performance
or achievements of the combined company. Exploration results that
include geophysics, sampling, and drill results on wide spacings
may not be indicative of the occurrence of a mineral deposit. Such
results do not provide assurance that further work will establish
sufficient grade, continuity, metallurgical characteristics and
economic potential to be classed as a category of Mineral Resource.
Among the key factors that could cause actual results to differ
materially from those projected in the forward-looking information
are the following: the future development and growth potential of
the Canadian and Australian operations; the future exploration
activities planned at the Canadian and Australian operations and
anticipated effects thereof; changes in general economic,
business and political conditions, including changes in the
financial markets; changes in applicable laws; and compliance with
extensive government regulation. This forward-looking information
may be affected by risks and uncertainties in the business of
Kirkland Lake Gold and market conditions. This information is
qualified in its entirety by cautionary statements and risk factor
disclosure contained in filings made by Kirkland Lake Gold,
including its annual information form, financial statements and
related MD&A for the financial year ended December 31, 2018,
and its interim financial statements and related MD&A for the
period ended September 30, 2019, which are filed with the
securities regulatory authorities in certain provinces of Canada
and available at www.sedar.com.
Should one or more of these risks or
uncertainties materialize, or should assumptions underlying the
forward-looking information prove incorrect, actual results may
vary materially from those described herein as intended, planned,
anticipated, believed, estimated or expected. Although Kirkland
Lake Gold has attempted to identify important risks, uncertainties
and factors which could cause actual results to differ materially,
there may be others that cause results not to be as anticipated,
estimated or intended. Kirkland Lake Gold does not intend, and do
not assume any obligation, to update this forward-looking
information except as otherwise required by applicable
law.
Cautionary Note to U.S. Investors -
Mineral Reserve and Resource Estimates
All resource and reserve estimates included in
this news release or documents referenced in this news release have
been prepared in accordance with Canadian National Instrument
43-101 - Standards of Disclosure for Mineral Projects ("NI 43-101")
and the Canadian Institute of Mining, Metallurgy and Petroleum (the
"CIM") - CIM Definition Standards on Mineral Resources and Mineral
Reserves, adopted by the CIM Council, as amended (the "CIM
Standards"). NI 43-101 is a rule developed by the Canadian
Securities Administrators, which established standards for all
public disclosure an issuer makes of scientific and technical
information concerning mineral projects. The terms "mineral
reserve", "proven mineral reserve" and "probable mineral reserve"
are Canadian mining terms as defined in accordance with NI 43-101
and the CIM Standards. These definitions differ materially from the
definitions in SEC Industry Guide 7 ("SEC Industry Guide 7") under
the United States Securities Act of 1933, as amended, and the
Exchange Act.
In addition, the terms "mineral resource",
"measured mineral resource", "indicated mineral resource" and
"inferred mineral resource" are defined in and required to be
disclosed by NI 43-101 and the CIM Standards; however, these terms
are not defined terms under SEC Industry Guide 7 and are normally
not permitted to be used in reports and registration statements
filed with the U.S. Securities and Exchange Commission (the "SEC").
Investors are cautioned not to assume that all or any part of
mineral deposits in these categories will ever be converted into
reserves. "Inferred mineral resources" have a great amount of
uncertainty as to their existence, and great uncertainty as to
their economic and legal feasibility. It cannot be assumed that all
or any part of an inferred mineral resource will ever be upgraded
to a higher category. Under Canadian rules, estimates of inferred
mineral resources may not form the basis of feasibility or
pre-feasibility studies, except in very limited circumstances.
Investors are cautioned not to assume that all or any part of a
mineral resource exists, will ever be converted into a mineral
reserve or is or will ever be economically or legally mineable or
recovered.
FOR FURTHER INFORMATION PLEASE CONTACT
Anthony Makuch, President, Chief Executive
Officer & DirectorPhone: +1 416-840-7884E-mail:
tmakuch@klgold.com
Mark Utting, Vice-President, Investor Relations Phone: +1
416-840-7884 E-mail: mutting@klgold.com
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